Small Business Banking Still the Red-Headed Stepchild

November 9, 2012, at 11:22 am

Our J.D. Power and Associates 2012 U.S. Small Business Banking Satisfaction StudySM suggests that banks should focus on small business customers because of the value they represent, when compared to retail customers. On average, small businesses hold deposits four times greater and loan balances 15 times greater than retail banking customers.1 Small business customers also carry higher levels of personal banking business than the average consumer. In addition, the profit margins on small business customers are typically larger than those on larger corporate banking customers.

Yet, based on the results of the study, just released today, it appears that small businesses, like Rodney Dangerfield, get no respect. Despite overall satisfaction increasing by 19 index points year over year to 736 (on a 1,000-point scale) in this year’s study, it still represents one of the lowest-scoring financial services businesses that J.D. Power and Associates examines. Only mortgage servicing is lower. Even its perennial low-scoring counterpart, credit card, has surpassed small business banking in satisfaction to levels enjoyed in the retail banking sector.

The Small Stuff Matters
The study finds that when small business banking customers are greeted by name, the positive impact on overall satisfaction is 106 points. However, this occurs only 47 percent of the time, compared to 64 percent of the time among retail banking customers, representing a 17-percentage-point gap. This disparity occurs even though small business customers bank in person at the branch more than twice as often as retail customers (36 times vs. 16, respectively, on an annual basis).

“When it comes to customer satisfaction, sometimes it really is the little things that matter. Simple gestures, like greeting customers by name as they walk in, go a long way in providing a satisfying experience,” said Jim Miller, our senior director of banking at J.D. Power and Associates. “Due to the value of their business to the bank, and how frequently they visit the branch, small business banking customers expect, and deserve, a level of service that is greater than that of retail banking customers.”

Banks should focus on meeting the needs of small business customers for various reasons. As the economy recovers, small businesses will be at the vanguard of the growth through the expansion of existing enterprises and the addition of new ones. In this regard, small business sentiment captured in the J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study certainly reflects optimism regarding future prospects. The study shows a notable increase in the proportion of small business banking customers who perceive their financial stability and the economy overall are “better off” this year, compared with previous years.